The Impact of Reverse Mixed Ownership Restructuring on Listed Private Companies

The reverse mixed ownership reform of privately-owned listed companies in China involves integrating private capital with state-owned capital, which enables private enterprises to fully leverage the power of state-owned capital to address issues related to financing, politics, and resources. Synchronously, state owned capital can also invest in high-quality private enterprises, helping them expand while also broadening the industrial layout of state-owned capital, ultimately creating a win–win situation for both parties. By examining the reverse mixed-ownership reform in this paper, we aim to provide a more comprehensive understanding of its impacts and outcomes, offering practical guidance for M&A professionals in their future industrial mergers and acquisitions. This study focuses on private listed companies that have undergone reverse mixed-ownership reform and uses a difference-in-differences (DID) model to assess the reform’s impact on the firms’ economic outcomes. We also adopt a Probit model to explore whether these firms are more likely to experience asset restructuring after the completion of the reform. Finally, we study the economic consequences of asset restructuring following reverse mixed-ownership reform. In doing so, it provides an integrated analysis of changes in operating metrics before, during, and after the reform and subsequent asset restructuring. The main findings are as follows: 1. After privately listed companies undergo reverse mixed-ownership reform, their net profit attributable to the parent company (excluding non-recurring items) decreases significantly. 2. Firms with higher leverage (asset-liability ratio), a larger shareholding among the top ten shareholders, or central state-owned enterprise (SOE) participation in the reform are more likely to proceed with asset restructuring once the reform is completed. Moreover, for companies with higher top-ten shareholder ownership and those involving central SOEs, the time to initiate asset restructuring after completing the reform is significantly shorter. When private enterprises receive equity investment from state-owned capital and carry out reverse mixed-ownership reform, the financial performance, proxied by Return on Assets (ROA), does not show a significant change by the time the restructuring stage begins. However, after these reverse mixed-ownership enterprises complete asset restructuring, their R&D intensity actually decreases.